Vindigo appears to have turned out the lights, but the closure of the Japanese-owned firm may have more to do with cultural differences than the fact that mobile content is a tumultuous space.
A pioneer in the early days of mobile content, Vindigo was acquired four years ago for $36.5 million by Japan’s For-Side.com, which had previously acquired the ringtone provider Zingy. For-Side combined the two New York-based firms in a failed effort to take them public; the parent company then failed to find a buyer and pulled the plug on its subsidiary last week, effectively fleeing the U.S. market.
Bankruptcies and closures are nothing new in mobile content, of course, but Vindigo’s failings weren’t entirely market-related, according to Jason Devitt, who founded the company in 1999.
“There was a big culture clash. I think it was magnified in the case of For-Side because none of the senior executives spoke English, and they refused to hire an interpreter,” Devitt said. “I think because of the early success of i-mode, they really seemed to believe they could come over here and do exactly the same things. And that didn’t work.”
Other U.S. companies have also made recent headlines after being spun off by Japanese ownership:
–Mobliss, which was acquired in 2004 by Japan’s Index Corp. for $15 million, merged with fellow game-maker Reaxion to form PressOK Entertainment. Mobliss gained substantial traction powering text voting for “American Idol,” but shifted its focus to games after being acquired by Index.
–UIEvolution notched its first funding round since being repurchased by a group of Seattle-area investors from Square Enix, a Japanese firm that spent $58 million to pick up the outfit in 2004. Intel led the investment round, which generated $5 million.
–Airborne Entertainment Inc. founders Garner Bornstein and Andy Nulman bought the company back from Japan’s Cybird Co. Ltd. Airborne came to prominence as a mobile media firm and sold to Cybird for roughly $100 million; it has since expanded into mobile marketing after retaking the reins.
Differing business models
Airborne CEO Garner Bornstein echoed Devitt’s sentiments in explaining the failed tie-up with Cybird.
“It’s essentially cultural differences,” Bornstein said of the front-office tension at Airborne following the acquisition. Cybird executives “don’t understand how business in done in North America, they don’t appreciate that there is a difference. There’s a certain feeling that they know the answers and we don’t.”
Many of the problems go far beyond mere cultural differences, of course, underscoring the vast differences in geographic mobile markets. I-mode, of course, is widely credited as mobile data’s first big success. Implemented by NTT DoCoMo Inc. in 1999, the service uses a wide variety of platforms to offer a host of mobile services, and – in stark contrast to U.S. carriers – lures application developers with generous revenue splits.
While Japanese consumers were quick to embrace shopping for content on their phones, most U.S. consumers are only now beginning to understand and appreciate the capabilities of modern handsets. What’s more, severe shockwaves in the Japanese financial markets forced the companies to shift their focus back home just as they were beginning to tap U.S. consumers.
“In any big merger or acquisition, there’s a combination of equals; you’re always hoping to achieve some sort of scale,” Devitt observed. “You can take a product that’s been successful in one market and just hammer it out across other markets. In mobile it doesn’t appear there’s an opportunity to do that. And to take the heat off the Japanese, it’s doesn’t appear that anybody has done that.”
